More Americans know how much they pay for streaming services than how much they pay for their 401(k) plans.

Only 27% of Americans knew how much they were paying in 401(k) fees, a recent study by TD Ameritrade of 1,000 investors found, compared to the 95% of respondents who knew how much they shell out for streaming media services like Netflix
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and Hulu. But 401(k) fees can be much costlier, immediately or in the long-run, as fees can diminish potential investment earnings. “The most important thing is to recognize what you are paying for,” said Matt Sadowsky, director of retirement at TD Ameritrade.

How much they cost you

Large plans have an average fee below 1% while small plans are somewhere between 1.5% and 2% (of the account balance), according to an analysis of 401(k) plans by Brightscope, But other plans can be up to 3.5% or more per year. Anything above 1% is a “rip-off,” according to a Yale University study. “For many plan participants, welfare in retirement — and even the ability to retire — hinges on the performance of the mutual funds in their retirement portfolios,” the researchers said.

In an effort to implement a rule requiring financial advisers act in their clients’ best interests and stray from high-cost funds that earn them commissions, the Obama Administration argued retirement savers lose $17 billion a year to conflicted advice and unnecessary retirement account fees. (The so-called “fiduciary rule,” which was to go into effect this year, has been delayed by the Trump administration).

Fees are sometimes paid for directly from investment returns, while others are paid for by employers or deducted from the plan’s assets, according to the Department of Labor.

What to look for

There are a few types of fees savers may be paying:

• Administrative fees: These fees are for general management of the 401(k) and can be referred to as recordkeeping or legal and trustee services. Plans may also offer services such as access to a customer service representative or educational seminars.

• Investment fees: This is the largest driver of 401(k) fees, according to the Department of Labor, and involves investment management and other services generally charged as a percentage of assets.

• Service charges: These are associated with features or plan options the plan sponsor offers, and they vary. One example is a fee for taking a loan from the plan.

Other fees to consider, based on the investments themselves:

• “Loads,” or commissions, are sales charges for buying or selling shares of the fund. For some mutual funds, there is a “front-end load,” which are fees paid for when initially invested, or “back-end load” or “deferred sales charges,” which are charged when the shares are sold. Front-end loads reduce the amount of the initial investment, whereas back-end load fees are determined by length of investment.

• 12b-1 fees are ongoing fees paid through the assets and are used for commissions to brokers or other salespeople (such as advertising to promote the fund).

• “Investment advisory fees” or “account maintenance fees” are ongoing charges for managing the assets of the investments, and depend on the manager or product. The more research, management and monitoring the administrator does for the product, the higher the fees.

Where to find them

About 14% of the TD survey respondents said they don’t know how to determine the fees they may be paying. That could be because it’s not always easy to find the information. One way is to read your 401(k) plan’s summary annual report, a document that participants are required to receive that lists expenses, benefit amounts and the total value of plan assets. You can ask your administrator for the document. Participants can also ask for a prospectus for the funds of the account, which will list details of the funds the plan is invested in and any underlying expenses. Another potentially helpful document is the 404a-5 disclosure, which shows administrative and other expenses. A plan’s summary plan description, or SPD, provides explanations for what the plan is and does — but does not list fees.

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